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I will be opening a shop this summer and I have narrowed my search to two locations near a large shopping complex in a suburban area of 35,000 people who have an average household income of $105,000/yr. The complex is in a prime area on the busiest road in the state, with traffic backed up for 3 miles during rush hour without exception.
There are 7 other pizza joints within 3 miles of my shop, all located on the same road, but they are well upstream, in a commercial area, inconvenient for pick-up and at least 15 minutes away during rush hour. The only pizza shop within 1 mile of my location is a Chicago style joint that has a great pie but an average serving time of 45 minutes.
Lastly, there are an additional 20,000 commuters who live within 5 miles downstream of my potential location who pass by the shopping center each day. Since this shopping plaza is at the very end of development along the road, the commuters are “home free” once they pass this area.
I would like to focus on carry out to serve the commuters. I plan to offer limited casual dining and delivery as well. My product will be superior to other pizza places nearby, but I understand I need to be convenient, not just better.
I have 2 lease options:
A former pizza place that would suit my needs perfectly. Formerly a small chain store that was mismanaged and closed quickly. (I know the former owner. She was never in the store and thought she could hire cheaply and the employees would run the store). They were only open a few months. The only drawback, and it is a big one I am afraid, is it is on the wrong side of the road and it would require commuters to navigate two u-turns on a very busy highway to get back on the road home.
Another location is also directly on the main road with high visibility. It is located on the coveted “going home” side of the road with about as easy an access on and off as you can get. The only problem, it is about 1200 sq. ft. larger than I need and the rent would be almost double the first location. It would also require an extensive build-out which would leave me with little room for error once I opened unless I brought in a second investor (which I could do).
Which location do I choose? I would absolutely do much more business on the “going home” side of the road.
I think you just answered your own question! I opened my first store in a very mediocre location 5 1/2 years ago and I’m still paying the price for it. It’s dense and I have the best location in my area for deliveries because of the proximity to residential areas, but we’re on the end of the city where we don’t get as much drive-by traffic. About 2,000 cars pass by my place everyday. If you go 2 miles west of me the number goes to 75,000. As soon as I let up on advertising at this location my sales drop. It’s a continuous cycle to keep business up. It’s also a horrible lunch location.
I learned my lesson and opened my second store in one of the best locations in the state. It’s a large, beautiful multi-use development anchored by a very busy movie theater (24 screens) and an outdoor mall with middle level retail (Abercrombie, American Eagle, Aeropostale, etc.) All we did there was open the doors and the store was doing $20k per week.
Location, location, location.
By the way, the demographics of my first location are very similar to yours. People making upwards of $100,000 are very savvy with money. They’ll expect great quality and great service but also great value.
Any decision as to location must depend on whether or not a location can make you money…No matter how good the “preferred” location is, if it can not generate enough income to make it profitable it is no good…You should not take the best of the 2 locations just because it is on the top of your list if they are not supported by your business plan…
Also, you can never count on future development not happening…Some day you may not be the last on the road or the access to the place across the street may improve…How does that affect your sales part way into a long lease?..
So you want to open a business mowing lawns. You can buy a walk behind 22" mower at walmart for $99 or a commercial ride on mower for $5000. Which one should you do? If you have the 5k most people would suggest buying the commercial mower. However, if you are going to have to sell your truck to get the 5k you wont be able to get the commercial mower from job to job. It is possible to make money with the $99 mower, you just might have to work harder.
Fortunately, there is a mountain (big hill) just past the shopping center which will prohibit future development - and the rest is mostly gated subdivisions after that.
Based upon the average of my projections, in the better location my rent would most likely end up around 15% of my sales during the first year, but could very reasonably fall below 10% in short order. I would start out paying 5K a month in rent with an estimate of 30K a month in sales average for the first year. In the lesser location I would only pay 3K a month in rent but I’m afraid my sales would be at least 40% less.
I do believe the market I am in will support 60-70K in monthly sales, but I don’t expect to get there overnight.
